Most of us will admit that it can be quite difficult to predict the future. No one really knows how events will play out. But determining what happened in the past can be equally challenging. It appears that we are overly confident in explaining an event that has already occurred. The reason is that people, including historians, are subject to bias and impose false order upon random events.
People tend to act based on incentives. Everyone is subject to them, even financial advisors. What are your advisor's incentives? Take a listen.
"An estimated one in five older Americans have been financially exploited," according to an article in Barron's, describing the situation as an epidemic. While seniors are subject to a variety of scams, the majority of financial abuse "comes at the hands of family members, friends, or caregivers improperly using a retiree's money." In fact, "AARP found that financial exploitation by family members involves larger sums than those by strangers."
A common example is when an adult child is being compensated for the time she spends caring for an aging parent. Eventually, the child begins drawing additional funds for herself because she "deserves" it. An open conversation with the other siblings or family members can help provide transparency. Requiring more than one person to engage in, or review, financial transactions on behalf of seniors also helps.
It is important to be aware of the warning signs that someone you know may be vulnerable:
The presidential election brought home a major point we always seem to forget -- our quest for certainty is never achieved. We crave certainty because it's so comforting. We fear uncertainty because it can be painfully disorienting.
Yet surprises happen!
People tend to believe who they are today is pretty much who they'll be tomorrow, even when they have acknowledged to having changed significantly in the past. This phenomenon, known as the "end of history illusion," should make you a bit more cautious before making a major decision, like buying a house for retirement. You never know how your likes and dislikes evolve over time. Watch the video to find out more.